With COVID-19 causing a drastic change in
industries, the health industry is also expected to see a considerable change.
“Precaution is better than cure” is quite suitable for the Indian consumers as
there has been a drastic shift towards preventive testing wherein individuals
are now getting tested for diseases as soon as the slightest of the symptoms
occur, helping the diagnostic laboratory market to grow further during this
period.
In conversation with Dr. Kunal Sharma, Pathology Section Head- SRL Reference laboratory and
Consultant Oncopathologist- Fortis Hospitals, Bangalore, we attempted to
seek his opinion and understand his side of story to ‘India
Diagnostic Laboratory Market’. Here are some excerpts of the interview:
1. As you
have been a part of this industry for a number of years, how do you think the
trend has changed over time? Were there any major shifts witnessed in the
market?
I have been heading the section of Pathology
for SRL in Bangalore and also work as a consultant for Fortis Hospitals in the
city. In addition, I am a part of the
Covid Consultative Group (CCG), a govt. recognized task force composed of
policy makers, doctors, lawyers, and other industry experts which reports to
the Health Minister, CM and Central representative for the state of Karnataka,
to deal with the management of COVID-19 in the state. I mainly specialize
in Oncopathology and lead the centre of reference for Uropathology and
Flowcytometry in Bangalore. As far as the diagnostic market is concerned, with
regards to the recent trends, there has been emergence of a number of startups
dealing in specialized testing, targeting only specific specialties and
modalities. Besides the biggest national players such as SRL, Dr. Lal Path
labs, Metropolis and Thyrocare, there are players like Medgenome, Oncquest laboratories
and Core which are mainly into molecular diagnostics and oncology. The big
three as I call them, namely SRL, Dr. Lal Path labs and Metropolis Healthcare
Limited also have well defined segments of high end testing in their test menu. In oncology, we are moving into the era of
targeted treatment. Earlier the anti - cancer drugs would target all the
rapidly growing cells in the body, causing side effects such as hair loss,
nausea etc. We are now focusing on targeted
drugs which would target cells which harbour a specific mutation which is
detected through molecular tests. This results in more specific treatment with
lesser side effects. Tests such as FISH and NGS are being used to diagnose,
prognosticate and determine treatment options for diseases.
2. Despite
being the healthcare sector wherein regulations should be a must in order to
have accurate reports, this industry does not have standardized regulations.
What has been the effect of the same?
The regulatory body for healthcare in India is
NABL. Despite their constant efforts, the industry is still predominantly
unregulated. There is lack of standardization throughout the rural and semi-
urban areas. Even in molecular testing modalities like NGS, inter lab
variations are a plenty. The testing protocols, kits and technical SOP followed
by Lab A may not be the same as followed by Lab B resulting in discrepancies in
the reports issued. For the general public, they would prefer a report from a well-established
Lab like SRL as these labs put in a lot of research into their testing and have
the highest accreditations like CAP and NABL ensuring most stringent quality
practices. Also, the stakes for bigger labs are much higher and they cannot
afford to have wrong results. Startups are mainly focusing on putting something
in the market, before anybody else does, so they can create a niche for
themselves and play a disruptive role in terms of pricing. But industry leaders
have a bigger responsibility.
3. About 70%
of the revenue for the industry comes from unorganized players. What are your
views on the same?
The market definitely has many unorganized
players who are mainly focusing on increasing their valuation so as to sustain
in the market. In order to gain momentum, they strive to lower their costs.
Introduction of new tests at a cheaper rate is a common strategy used. The
unorganized players are mostly concentrated in the tier 2 and tier 3 cities.
However, there is still high dependence on the players which have a PAN India
presence with a broad base of collection centers and franchisee labs.
Another change is in reporting regulations. In
2018, the Medical Council of India came up with a rule and the Supreme Court
made it a mandate that all the lab reports including those under the scope of
genetics will have to be signed by a MD doctor. I feel more than a technical
stand point, this actually helps to regularize the reporting and prevent
unregulated practices.
4. If we
divide the industry into radiology and pathology, which do you think dominates
the market?
In terms of their contribution towards the
overall market, 58% of the revenue would be from pathology and 42% from
radiology. The pathology business is the first step towards testing and is
highly scalable as blood samples can be easily shipped to a remote, centralized
location attaining economies of scale. However, what we also need to keep in
mind is that despite being a relatively more cut-based practice, something that
still exists; the margins involved in radiology are higher. Having said that,
both go hand in hand and one would not be able to survive without the other.
5. The
laboratory industry can be classified into hospital based labs, independent/stand-alone
labs and polyclinics. With respect to India, what do you think is most common?
Standalone labs are the preferred choice
because they would have a share of 47% followed by hospital based labs with 37%
and diagnostic chains with 16%. Diagnostic chains have grown rapidly as they
have a higher bargaining power allowing them to keep their input costs lower
than standalone centers. They cater to walk-ins and also regular health
checkups. Wellness and preventive health is becoming a major focus with
urbanization. For a hospital based lab, they mostly cater to illness. Along
with this, a majority of the hospital CAPEX would go into the clinical side.
6. With the
entire pandemic going on, how do you think COVID-19 is going to impact the
industry?
With COVID, the scenario will surely change.
From an industry perspective, what we need to understand is that a number of
industries such as tourism and airlines have gone into recession. But for
healthcare, it is here to stay. The way people treat life would change.
Initially, the symptoms which were ignored would now be given more attention
to. More preventive measures would be taken, which would help the diagnostic
lab industry to grow. We are actively looking for a vaccine for the same. There
are a number of institutes such as the Serum institute which is currently doing
their research for a vaccine. Once a proper cure is available, we might be
getting back to a normal life. I feel that by December or latest May next year
we should have an answer to it.
7. How has
the growth for the diagnostic industry been in the Tier 1, Tier 2 and Tier 3
cities of the country?
Tier 1 and tier 2 cities would be in the lead.
The urban population, which is ~28% of the country’s population, contributes up
to 65% to the overall revenue of the diagnostics industry. Reference labs are
mostly concentrated in the tier 1 cities where as tier 2 and 3 have collection
labs or labs conducting routine testing. For high end testing, the samples are
couriered to their reference labs. However, with the introduction of digital
pathology, the model has been changing. For instance, the reference labs are
facing heavy loads of sample and despite the large number of workforce; the
sample size at times can be overwhelming. As a result strategies are developed
through digital pathology platforms to get the pathologists in other labs to
report these cases. Slides can be scanned and images can be sent to other labs
where the reporting can be performed.
8. With the
whole lockdown, the government of India has tried to regulate the telemedicine
market. How would that have an impact on the diagnostic industry of India?
Like in India we have NABL, the US has College
of American Pathologist (CAP) and they are also accrediting a number of labs in
India. If we take the example of CAP, it mobilizes its members to directly
lobby the Centers for Medicare and Medicaid Services (CMS) and the Department
of Health and Human Services to give pathologists the workforce flexibility
they require to manage the COVID-19 pandemic.
With the lockdown, what the CAP has done is
that it has given signatory authorities for digital pathology platforms.
Regulatory authorities are trying to bring in laws for the same. The digital
pathology market is only here to grow. We are looking at a billion dollar
industry. Philips, Leica, Roche and other companies have already come up with
such technologies.
9. As of
date, only about 15-20% of the Indian population has health insurance. How
would insurance affect the diagnostic industry?
There are mainly two things that we need to
look at. Firstly, approximately 75% of the expenditure on health is done privately
in India. Majority of the population doesn’t have health insurance and even for
the people who have it, it is mostly in the clinical sector and not for
diagnostic. But what we also need to understand is that with high end tests
entering the market like molecular and genetic testing some of which cost in
thousands and lakhs, the cost is equivalent to the treatment of a less
complicated disease. The other problem that lies is that for diseases like
cancer, you cannot start the treatment until there has been an exact diagnosis
of the same. These diseases have extremely specific protocols which can only be
instituted once the individual has the complete diagnosis. And it is for the
same reason; health insurance needs to have a broader prevalence in this
segment. As of now, majority of the payment is through out of pocket
expenditure.
10. How do
you think the diagnostics industry of the country would change in the next five
years?
Because of COVID, one thing is for sure, that
a lot of small players would not be able to sustain in the market. We would be
looking at a number of mergers and acquisitions. Along with this, diagnostics
will play a major role in the lives of the people. Now is the time when the
experts need to come together and have indigenous production of testing kits.
Some of the top institutional investors are backing the diagnostics sector of
the country and helping in investments. India is still behind in testing;
however we have been able to do a decent job because our active surveillance system
is extremely good. The primary health workers are focusing on contact tracing
which has helped to keep the situation under control.
11. As SRL
is one of the major players in the market, what would be their USP in the
diagnostic sector? What are the future plans for the company?
We at SRL focus a lot on principals such as
patient care and doctor feedback. With the help of this, we actively take
feedback on what kind of testing is in need in the market. Along with this, we
on-board people who are best in the business and probably have the most
detailed and robust research and development wing. This helps us to validate
routine and high end tests with absolute focus on quality of testing and
reporting. As industry leaders, we make sure; we keep improving and delivering
the best in diagnostics. I will not be able to share any company specific
information though, but all I can say is, you can expect the best from us,
always!
Verbatim:
“For me and
many experts, the era of diagnostics in India has just begun. With exponential
rise in cancer and infectious diseases like COVID-19, people will understand
the need for accurate, proper and timely diagnosis.”
For any
queries or feedback, reach out at namit@kenresearch.com
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